Decentralization and Local Governments' Performance: How Does Fiscal Autonomy Affect Spending Efficiency?

Lorenzo Boetti (), Massimiliano Piacenza and Gilberto Turati ()
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Lorenzo Boetti: Catholic University of Milan

No 11, Working papers from Former Department of Economics and Public Finance "G. Prato", University of Torino

Abstract: In Italy, as in other countries around the world, recent reforms share the goal of increasing the fiscal autonomy of lower tiers of governments, from Regions to Municipalities, in order to align spending with funding responsibilities and increase the efficiency in the provision of essential public services. The purpose of this paper is to assess spending efficiency of local governments and to investigate the effects of tax decentralization, focusing on the role played by incumbent politicians' accountability. The analysis relies on a sample of Italian municipalities and exploits both parametric (SFA) and nonparametric (DEA) techniques to study spending inefficiency and its main determinants. Consistently with modern fiscal federalism theories, our results show that more fiscally autonomous municipalities exhibit less inefficient behaviours. We also find that the shorter is the distance from new elections, the higher is excess spending, thus giving further support to the traditional 'electoral budget cycle' agument. Other political features of governing coalition, such as age and gender of the mayor, do not seem to exert any significant impact on inefficiency levels.

Keywords: Local governments; Fiscal autonomy; Political accountability; Spending efficiency; Parametric and nonparametric frontiers (search for similar items in EconPapers)
JEL-codes: D72 D78 H71 H72 H77 R51 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2010-03
New Economics Papers: this item is included in nep-eff, nep-geo, nep-pbe and nep-ure
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Citations: View citations in EconPapers (8)

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http://www.bemservizi.unito.it/repec/tur/wpaper/n11.pdf First version, 2010 (application/pdf)

Related works:
Journal Article: Decentralization and Local Governments' Performance: How Does Fiscal Autonomy Affect Spending Efficiency? (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:tur:wpaper:11

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